Decline in Oil Prices Lands on Government Workers as Saudi Arabia Cuts Paychecks

King Salman of Saudi Arabia in April. The cuts were unveiled in a series of royal decrees and cabinet statements read aloud on state television.Credit
Stephen Crowley/The New York Times

RIYADH, Saudi Arabia — Saudi Arabia on Monday announced sudden, drastic cuts to salaries and perks for government employees as part of the kingdom’s struggle to slash spending at a time of low oil prices.

The cuts, unveiled in a series of royal decrees and cabinet statements read aloud on state television, reduced ministers’ salaries by 20 percent, slashed perquisites for members of the consultative assembly and limited overtime pay and vacation for civil servants.

The drop in world petroleum prices since 2014 has caused major financial problems for the Saudi government, which gets most of its income from oil and ran a budget deficit of nearly $100 billion last year.

The new measures came as a shock to many in the country’s bloated public sector, which for decades has served as a vehicle for the royal family to distribute its oil wealth in the form of well-paid jobs that often require little work.

More than two-thirds of employed Saudis work for the government.

The government this year started a major project, known as Vision 2030, aimed at overhauling the economy, reducing the dependence on oil and creating a more productive native work force.

Yet few of the plan’s measures have been put in place. The government has raised fuel and water prices and frozen large construction contracts, leaving some companies unable to pay their workers.

But Monday’s cuts were the first to reduce Saudi paychecks.

Royal decrees cut ministers’ pay by 20 percent and forced them to pay their own telephone bills for personal lines. They also cut by 15 percent stipends for housing, cars and other perks for members of the country’s consultative Shura Council, who are appointed by the king.

In a statement, the cabinet limited the bonus that civil servants can earn for working overtime and capped annual leave at 30 days. It also put a freeze on new hires for government jobs through the end of the year.

Saudi troops currently involved in the country’s war in Yemen were exempted, the statement added.

Besides its budget difficulties, the Saudi economy also faces a demographic challenge, with an estimated 300,000 new job seekers entering the market every year. With the government no longer able to absorb them, many economists doubt that the private sector can either, threatening to raise unemployment rates.